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Hello, and welcome to your 2-Minute Money Manager. I’m your host, Stacy Johnson, and this two-minute answer is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.

Today’s question comes to us from Jennifer:

“My boyfriend and I are buying a house together. I recently heard about something called mortgage life insurance. What’s the difference between mortgage life insurance, and regular life insurance?”

Jennifer, here are three things you need to know:

Thing No. 1: It’s insurance that’s tied to a specific debt

Mortgage life is a subset of a category of insurance called “credit life.” Credit life is life insurance tied to a specific debt. It could be a credit card, a car loan or — in this case — a mortgage. It’s simply life insurance that pays off a specific debt if you should die while there’s still a balance.

As we all know, regular life insurance pays a death benefit if you should die within the term of the policy. In the case of life insurance, your beneficiary receives the death benefit. In the case of credit life insurance, the death benefit goes to a lender to retire a debt.

Thing No. 2: The pros of credit life

If you can’t qualify for any other kind of insurance due to poor health or other reasons, credit life offers a way to extinguish a debt if something should happen to you. Also, you typically don’t have to get a physical to prove you’re healthy, as you do with regular life insurance. So, credit life is less hassle.

Thing No. 3: The cons of credit life

There are several disadvantages associated with mortgage life insurance. One thing I really hate about this stuff: You’re paying a level premium every month, but your mortgage is getting smaller. If your debt is declining, shouldn’t the money you’re paying to insure it every month also decline?

Another thing I don’t like: It’s typically more expensive than regular term life insurance. If you’re healthy, you’ll find term life insurance for less than you’ll pay for credit life. Granted, you may have to endure a physical for regular life insurance, but insurance physicals aren’t that big a deal and the savings could be significant.

A final problem with mortgage life: If you die, the proceeds of your policy will bypass your heirs and go directly to your lender. Remember, this is insurance to pay off a mortgage, not to otherwise provide for your family. With regular life insurance, your beneficiary gets the proceeds and uses the money as he or she sees fit. Maybe the beneficiary will pay off the mortgage, but maybe there are other bills that are more important. In short, regular life insurance is more flexible.

Bottom line? Get term life insurance if you can. If you can’t — that is, if you can’t qualify for insurance because of a pre-existing health condition, and really feel the need to protect your family from a mortgage debt — maybe take a look at mortgage life. But make it a last resort.

Want to learn more? Go to MoneyTalksNews.com and do a search for “insurance.” That’s your answer for today. Meet me right here next time!

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About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

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I'm the founder of Money Talks News and have spent the last 40+ years in the personal finance trenches. I'm a CPA, author of a few books and multiple Emmy recipient. I'm ... More

I'm the founder of Money Talks News and have spent the last 40+ years in the personal finance trenches. I'm a CPA, author of a few books and multiple Emmy recipient. I'm married to a woman I don't deserve, have an awesome dog and live on the water in Fort Lauderdale, Fla.